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You are here: Home / Investing / How to Minimize Shocks from the Unknowns and Unknowables of Life

How to Minimize Shocks from the Unknowns and Unknowables of Life

“Life,” John Lennon said, “is what happens to you while you are busy making other plans.” We have seen ample proof of this in the last year.

However, here is a tool, a mental model, a practice that can help us minimize the shocks that the unknowns and unknowables of life render us from time to time.

It is called ‘margin of safety’ – a widely known but rarely applied idea – which is an engineering concept that is used to describe the ability of a system to withstand loads that are greater than expected. In simple words, it is a buffer between what you expect to happen and what could (and often would) happen.

Life may offer you a raw deal, sometimes when you least expect it. A wide margin of safety ensures that the effects of good decisions are not wiped out by errors, uncertainties, or simply bad luck.

Of course, applying margin of safety in your decisions will not keep situations from going wrong, it will act as a cushion for you to fall back on and survive if and when things go wrong, which they will.

Stay safe. Get vaccinated. Wear a mask.

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Comments

  1. Mohan Lal Tejwani says

    April 28, 2021 at 12:38 pm

    Very well explained. Thanks for sharing your valuable thoughts.

    Best wishes and regards 🙏☺️

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